High-Priced Housing Spawn ?Cycles Of Sprawl?

June 14, 2002

Experts Examine Housing Shortage, But Provide Few Solutions

By Marcie Geffner Inman News Features

New York City ? When it comes to alleviating the nation?s acute shortage of affordable housing, experts are long on the nature of the problem but short on practical solutions that would enable more low- and moderate-income people to purchase their own homes.

The ease of dissecting the problem and the difficulty of proposing and implementing effective solutions were on display Wednesday during a press briefing on housing affordability that was held at the historic Apollo Theatre in New York City?s Harlem district and organized for reporters by the National Association of Real Estate Editors.

Nicholas Retsinas, director of Harvard University?s respected Joint Center for Housing Studies, opened the discussion with a preview of the center?s annual state of the nation?s housing report, this year?s installment of which is scheduled to be released later this month.

Retsinas said the report has been prepared year after year in a climate of unprecedented economic prosperity, but this year interrupted that trend.

"This is the first report that is dealing with the absence of prosperity. It?s a very very different time," he said.

The center?s forecast is "relatively bullish for the housing sector overall" in terms of household formation and the housing markets, but not everyone has or will benefit from housing?s strength.

"The cliché that a rising tide lifts all boats turned out to be just a cliché. We have realized, not withstanding the unprecedented prosperity of the last decade, that not everyone had a boat and some of the people who had boats didn?t have oars and they were submerged by the prosperity," Retsinas said.

The social contract in this country once was that getting a job and working hard was a ticket to a home, Retsinas said. But today a minimum wage worker spending 30 percent of his or her income on housing can?t afford a moderate two-bedroom apartment in any jurisdiction in the country--even adding the unlikely assumptions that the worker is paid for a whole year?s labor and has health insurance and a car that never needs repairs.

"Prosperity hasn?t solved (housing) affordability," he said.

Retsinas also said the classic image of poor families as being headed by people who don?t want work is a myth. In fact, 78 percent of the lowest fifth of the nation?s households, who earn $10,500 annually on average, are either working or retired. Two-thirds of them are white, one-half are homeowners and a high percentage are elderly. At the bottom income rungs many people have little or no equity in their homes, and one study found they spend only $55 a year on average on home maintenance.

"In some ways, recent prosperity and low interest rates have masked the affordability problem that this country faces. It has made many of those people more vulnerable to economic downturns," he said.

John McIlwain, senior resident fellow for housing at the Urban Land Institute, addressed the problem of so-called "workforce housing" for teachers, police officers and others of that ilk. He said the nation?s population is growing by millions of people each year and more affordable housing is being built, but workers are having to move even further away from their job locations in order to purchase a home.

The outward movement of home buying is pushing business development further away from the established cities and creating "cycles of sprawl," McIlwain said.

He argued that the shortage of workforce housing isn?t being adequately addressed through political means because while housing is a top priority for the nation?s city mayors, it is not a top priority for the Federal government.

"There is going to be a Federal housing appropriation this year, but no real focus on low-income housing or workforce housing is going to be addressed," he predicted.

Retsinas also said there is "no appetite" for housing legislation at the Federal level.

McIlwain said there is unfortunately only one solution to the housing problem, and that is money.

"If you listen to politicians talk about housing and they don?t talk about money, you know they are taking you in the wrong direction and are trying to obfuscate the issue," he said. "We should be spending three times as much money on housing at the Federal level, and all that would do would be to bring us back to the level of spending in the 1970s. Eighty to 90 percent of the housing we built then is very good housing."

The third panelist?and the only one of the three who has hands-on experience as an affordable housing developer?was Martin Edwards Jr., 2002 president of the National Association of Realtors.

Edwards said Realtors are in a prime position to participate in the debate over housing affordability because they have a stake in their communities and can deliver information and results at the local level.

"I believe Realtors have a moral obligation to be involved in the solution," Edwards said.

He then reviewed NAR?s new housing opportunity program and mentioned some existing local-level housing affordability programs. He also described some of NAR?s activities in this arena, including the association?s support for Federal legislation that would create a homeownership tax credit for builders.

NAR?s budget for the housing opportunity program is about $2.17 million this year and the next two years, or about 37 cents per Realtor member. Those funds will be used for research, coalition building, legislation, education and training, communication and a housing affordability Web site that will be unveiled in November. The association also is planning a housing affordability symposium that will be held in Washington, D.C.